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Friday, 8 October 2010

Zambia Budget 2011

The Finance Minister, Situmbeko Musokotwane MP delivered the Budget Statement today. Further analysis to follow, but a key change appears to be the reduction in donor contribution and greater reliance of borrowing - the government is planning to borrow nearly half a billion US dollars to add to its existing rising foreign debt. But I am sure there some election goodies there! Its one study over the weekend!
Zambia 2011 Budget Address by Hon Musokotwane

Update :
And here goes the overview of main tax changes :

2011 Budget Highlights


  1. it is a incredible situation

    no word on ZCCM-IH

    The national budget is near 4 b US$..

    In this national budget, no advertisement about zccm-ih and its virtual benefits !!

    you have to know that only for its 20 % in KANSANSHI Mining, ZCCM-IH wait for more than 380 M US $ dividends....120 M US$ more each year ! !!

    ZCCM-IH receive ridiculous dividends and wait for its du, while in the same time its assets have several billions of US $ in cash !

    The total sum could receive ZCCM-IH in dividends is more than 800 M US$ .. and this total increase every day with copper 8000 $ ton !!

    800 M US$ is 20 % of this national budget !!


    With this 800 M US $ i'm sure that Zccm-ih and the GRZ could do a lot for the people.. but without reason, GRZ never talk about this scandalous siutuation !!

    why ?

    who receive money for never talk about it ?!!

  2. I note that our govt is willing to tax deformed bars 25% to protect the new industry. Think how many jobs would have been saved if we could do this to powdered milk, washing powder, tyres, toothpaste, chitenges, shirts, or any other product no longer available in a "Made in Zambia" version. Of course the easiest way to tax imports is drop the exchange rate 25% which puts the "Tax" in the producers pocket instead of the presidential travel fund......
    Exporting your job seems to be policy unless you work for a special favoured industry.

  3. R. Henson I totally agree with you. We need sector wide tax policies rather than picking on a particular product(s).I recently had a look at the latest Zambia Development Agency promotional booklet. The ZDA lists the tax rates as follows:
    I Corporate Tax:
    a. Standard 35%
    b. Mining 30%
    c. farming 15%
    d. Non traditional Exports 15%

    II Personal income Tax 25% to 35%
    III VAT 16%
    IV Withholding Tax 15% on rental income, consultancy, dividends and royalties for non residents.

    It is evident from the above list that the manufacturing sector has ceased to be a priority sector in the economy as the ZDA doesnt even bother to mention it!

    No sane person in this world would dare put any manufacturing facility in Zambia with corporate taxes as high as 35% on value adding enterprises. It is no wonder why BAT (Rothmans of Pall Mall) moved to Kenya, Colgate Palmolive, Johnson and Johnson, Reckitt Berkwirth, Dunlop, Serioes all gave up on Zambia. I dont know what Zambia got from these punitive taxes other than lay offs and a flood of the same products from other countries. Countries all over the world tend to have very low taxes that range from zero to 20% on manufacturing enterprises. In Zambia we are doing the exact opposite by promoting extractive (mining)industries with ridiculously low taxes!

  4. Frank,

    " No sane person in this world would dare put any manufacturing facility in Zambia with corporate taxes as high as 35% on value adding enterprises. "

    You're living in fantasy land if you think any mining company or foreign company actually pays 35% tax in Zambia. You are confusing the official tax rate with the real tax rate.

    The question therefore becomes not - what country has the lowest official tax rate, but in which country is it the easiest to evade taxes. Which by the way is a crime (so much for the 'rule of law' or 'property rights' - apparently those are 'inconvenient' when it is time to pay taxes).

    I don't see Equinox, Vedanta, etc. fleeing Zambia. Time to stop shilling for foreign corporations and start thinking of the country, or heaven forbid, the people.

    BAT - British American Tobacco is still there, as British American Tobacco (Zambia) plc.

    Colgate Palmolive Zambia Inc - still in Ndola.

    Do you have any evidence that any of the companies you listed left Zambia, and any of them left because of the high tax rate?

    Lastly, I think you are confusing the presence of big brand names with development. Would you take pride if those companies had Zambian names instead?

    Ruth Henson,

    Of course the easiest way to tax imports is drop the exchange rate 25% which puts the "Tax" in the producers pocket instead of the presidential travel fund......

    Won't 'dropping the exchange rate 25%' punish savers? In a deflationary environment, people are best served by keeping their money in the bank (which is why lowering the inflation rate to single digits will not itself stimulate the economy).

    By the way, the MMD are putting enough pressure on the exchange rate already, by borrowing an extra $500 million in the national budget. I imagine that is to make up for the reduction in 'donor funds' because of this Second Great Depression, caused by the very neoliberal supply side economics that they claim to be such fans of, and that has been pushed on Zambia and other countries by the IMF and World Bank.

  5. 76. Foreign Debt

    Mr. Speaker, Zambia's long-term economic prosperity depends on the resources we
    invest today. These investments in roads, bridges, and power stations are necessary in order
    to build a more economically vibrant Zambia for our children. Our domestic resource base
    cannot accommodate the substantial amounts required to finance these investments. In this
    regard, the Government intends to receive about US$400million in concessional and non-
    concessional loan disbursements during 2011.

    That absolute hogwash. The government 'needs to borrow' $400 million for infrastructure, because it refuses to tax the mines. In fact it let go of the windfall tax, which would more than cover that, just for this year alone.

    This $400 million borrowed is theft from the Zambian people. Especially without sorting out the Ministry of Works and other government ministries which are stealing hundreds of millions of dollars per year.

    80. Sir, in 2009, I announced the Government's intention to divest the majority of its equity in ZAMTEL. This was aimed at improving the quality of service and reducing high costs in the telecommunications sector. I am pleased to report that the Government divested 75 percent of its equity in ZAMTEL to LAP Green Networks of Libya earlier this year. LAP Green has already injected US$64 million for operations. The company has further committed to invest an additional US$75 million. With this fresh investment, ZAMTEL will set new standards in service delivery. This in turn will encourage the industry as a whole to reduce costs and improve the quality of service.

    So all it takes to turn Zamtel around is to $139 million? And that is what it was sold to the LIBYAN GOVERNMENT for?

    What an asset is sold to another government, how is this privatisation?

  6. MrK
    you should read and understand what someone has written before you go off shooting like a heat seeking missile!

    Of course BAT and Colgate are still in Zambia! But my dear they have no PRODUCTION or MANUFACTURING FACILITIES in Zambia! Colgate shut down its manufacturing facility in 2001! BAT closed down its plant in Lusaka in 2007. The two companies exist in Zambia as wholesalers! BAT products are manufactured in Kenya for distribution by BAT (Zambia) PLC in Zambia!

    By mentioning these brand names I am in no way suggesting that is what defines 'development'. I will dismiss that as your usual name calling habit and cheap grandstanding. I mentioned them for no other reason other than that they were a major feature of the manufacturing landscape in Zambia!
    After pointing out that the tax regime in Zambia essentially favours the extractive industries it does not make sense for anyone to suggest that he sees no reason why Vedanta would flee Zambia! This is a redundant statement in view of what I posted in my first contribution!

    MrK did you live through the 1990s or they passed you by? If it were not for the ill thought tax regime in Zambia what else decimated the manufacturing sector in Zambia? Do you recall how shoprite were allowed into Zambia and with what conditions? Werent they allowed duty free importation of their merchandise? Werent Zambian based manufacturers levied import duties on their inputs to the tune of 35%! Add to this corporate taxes as high as 35%! Tell me which manufacturer would survive this? You should also ask yourself what the tax structure is like in the countries from which the manufactured merchandise being stocked in Zambian based retail outlets are imported. Are manufacturing taxes in South Africa, Kenya, Botswana, Zimbabwe at the same level as in Zambia? What effect has this on Zambian products?

    If you lived in Zambia in the 1990s you would have known the alarm bells raised by Mark O'Donnell the then Chairman of the Manufacturing Association of Zambia about the threats to Zambia's manufacturing sector! Copper Harvest, Serioes, Gamma Pharmaceuticals, Swarp Spinning are all gone my dear! Both these local companies together with the multinationals shut down their
    manufacturing facilities. I attribute this shut down to a high and ill thought tax regime vis a vis the manufacturing sector.

    I humbly await your reasons for the decimation of the manufacturing sector in Zambia! You should also explain why despite the other sectors of the economy like Agriculture, Tourism and Mining growing at more than 4% over the last few years; the manufacturing sector's growth has been anaemic at 1% or less!


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